Motorola to lay off 9,400 more workers

Cost-cutting strategy aimed at turning a 2002 profit

By

DeborahAdamson

SCHAUMBURG, Ill. (CBS.MW) -- Motorola said Tuesday it will cut 9,400 more employees from its payroll and shut more chip manufacturing plants over the next 12 months to try to become profitable as revenue falls short of expectations.

The world's second largest cell phone maker
MSI, -0.72%
also warned that its first-quarter pro forma loss would be between 11 and 14 cents a share, much worse than the 3 cent loss expected by analysts polled by Thomson Financial/First Call. Motorola sees a 14 percent sequential decline in revenue, a five-year average seasonal dip that it said analysts didn't fully account for.

"We are planning conservatively for 2002," said Motorola CEO Christopher Galvin, during a conference call with analysts. "We will take further actions in the first quarter ... to lower our breakeven point."

Galvin said in a statement that he "sincerely regrets" the cuts, which to date would eliminate the jobs of almost 43,000 employees. Another 5,500 already were transferred to firms that purchased Motorola's operations or plants. Motorola said it hit an employment peak of 150,000 workers in August 2000. By the end of next year, the company expects to whittle the workforce down by 32 percent to 102,000.

During the current fourth quarter, the company told 4,100 people they would lose their jobs. Over the next year, another 4,000 would be axed from the semiconductor business while 1,300 from equipment manufacturing would be let go.

These actions should save the company $865 million next year and $1.1 billion a year thereafter. Charges related to these activities would come mainly in the fourth quarter, with some spillover to the first quarter.

For the current fourth quarter, Motorola expects to meet its own sales forecast of flat to an increase of 3 percent from third-quarter revenue -- to $7.46 billion. However, the performance still would fall short of the $7.63 billion expected by analysts. The pro forma operating loss would range from 4 to 5 cents a share, in line with forecasts.

Business segments exceeding expectations were commercial, government, industrial systems and personal communications while global telecom and broadband operations were down.

In 2002, the electronics company believes it can meet the 15-cent profit estimate of analysts even if revenue is 5 to 10 percent lighter than that of 2001 due to spending cutbacks by telecommunications customers. Executives said this year's estimated revenue would range from $29.4 billion to $29.6 billion, less than the $30.4 billion analysts had expected. That means next year's revenue should hover between $26.46 billion and $28.12 billion.

Motorola should return to profitability in the second half of 2002, Galvin said.

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